PL First Cut - Metro Brands Q2FY24

PL First Cut – Metro Brands Q2FY24 – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

Metro Brands Q2FY24: Revenue inline, miss on margins

CMP:1193| Accumulate | Market Cap: Rs324bn

Financial Highlights

•  Consol Revenues grew by 16.7% YoY to Rs5.6bn.
• Gross margins contracted by 55bps YoY to 56.8%
• EBITDA grew by 5.6% YoY to Rs1.6bn. Margins contracted by 293bps YoY to 28%.
• Adj PAT declined by 12.5% YoY to Rs0.7bn.
• ASP for Q2 came at Rs1500
• Added 29 net new stores in Q2 with entering 7 new cities.

Other Highlights

• E-commerce contribution increased from 8% to 11% in H1FY24
• MBL opened 56 new stores in 1HFY24 taking total store count to 795 and is on course to open 100 stores for FY24.
• FILA to see strategic repositioning coming in from FY25 onwards with old inventory by FY24.

View: MBL remains a pure play footwear retailer with strong presence across segments. We expect healthy topline growth in 2HFY24 given robust festive season with profit growth to likely remain tepid for FY24 amid consolidation of cravatex brand. However, growth is expected to pick up post that on steady distribution expansion and lower losses in FILA.

MBL currently trades at 65.7x FY25 EPS. We have an accumulate rating on the stock